Staying Out of Each Other’s Way: Common Ownership and Competitive Dissimilarity in a Global Context

Abstract

Research on the implications of common institutional ownership (meaning that one investor owns a sizeable number of publicly traded shares in two rival firms – i.e., dyads) has recently gained traction. However, it is unclear whether the effects of common ownership on firms’ strategies are transferable to the global domain, and whether national borders serve as boundary conditions. To gain a better understanding of these questions, we compiled an international dataset with 2,832 of the largest firms worldwide between 2008 and 2017, resulting in 136,410 dyad-year observations. We control for various confounding effects and confirm a positive relationship between common ownership and the competitive dissimilarity (i.e., unique competitive repertoires) of dyads. We also theorize on and test boundary conditions to that effect. First, we argue that within international dyads, firms are less likely to cannibalize each other, giving the common owner less reason to influence strategy. Second, when the majority of common owners come from a different country than the firms, owners suffer from an information disadvantage and are less able to serve as informational bridges. For both boundary conditions, we find negative moderation effects on the relationship between common ownership and competitive dissimilarity, which supports our argumentation.